AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” and the Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of The Hartford Financial Services Group, Inc. (The Hartford) [NYSE: HIG], which is the ultimate parent of the companies hereinafter mentioned. AM Best also has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of “aa-” of Hartford Fire Insurance Company and its pooling subsidiaries and affiliates, collectively known as the Hartford Insurance Group. Concurrently, AM Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” from “a+” of Hartford Life and Accident Insurance Company (HLA), reflective of it receiving full rating enhancement to the Hartford Insurance Group, driven by its growing contribution to consolidated revenue and earnings and the overall diversification it provides. The outlook of these Credit Ratings (ratings) is stable. All of the above companies are headquartered in Hartford, CT.
Furthermore, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” of Navigators Insurance Company and its wholly owned and 100% reinsured subsidiary, Navigators Specialty Insurance Company, collectively referred to as Navigators. Both companies are domiciled in New York, NY. Concurrently, AM Best has affirmed the Long-Term ICR of “a-” of The Navigators Group, Inc. (Delaware), a wholly owned downstream holding company of The Hartford. The outlook of these ratings is stable. Subsequently, AM Best has withdrawn the Long-Term ICR of “a-” and the indicative Long-Term IRs of The Navigators Group, Inc., as it is no longer the publicly traded ultimate parent of a rated entity as a result of its acquisition by The Hartford.
In addition, AM Besthas revised the outlook to negative from stable for the Long-Term ICR and affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of Navigators International Insurance Company Ltd. (NIIC) (United Kingdom). The outlook of the FSR remains stable.
The ratings of the Hartford Insurance Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The balance sheet strength assessment is derived from risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), which benefits from adverse development covers (ADC) for legacy asbestos and environmental reserves and Navigators’ business, along with a comprehensive reinsurance program with highly rated reinsurers. The group’s balance sheet strength also benefits from the financial flexibility afforded by The Hartford with access to the public debt and equity markets. Partially offsetting these benefits are variability in returns on investments and elevated net liability leverage compared with peers.
The group’s operating results reflect its adequate underwriting performance that is comparable to similarly assessed peers and composite norms. The organization has demonstrated an ability to organically grow stockholders’ equity by producing favorable levels of pre-tax operating income. Investment income has been consistent, as growth in the long-term bond portfolio was offset mostly by declining investment yields. The company’s multiple distribution capabilities support its strategy to build competitive advantage in the market. In addition, the acquisition of Aetna Inc.’s group benefits business added scale and market position, which will support results as the market becomes more challenging.
The favorable business profile reflects the group’s excellent market position within the property/casualty industry and its core group benefits market, geographic and product line diversity, experienced management team, generally conservative operating fundamentals and diversified underwriting initiatives, which provide balanced growth opportunities. The group’s use of technology platforms throughout the organization, localized support and excellent service further strengthen its business profile.
ERM is viewed appropriate for the pool’s size and complexity of its underwriting, investment and other risks based on its ERM framework and controls.
The ratings of Navigators reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate ERM. The ratings also reflect the implicit and explicit support provided to Navigators by The Hartford, its ultimate parent.
The balance sheet strength assessment of Navigators is derived from risk-adjusted capitalization at the very strong level. AM Best views the balance sheet’s quantitative and qualitative components as neutral; however, Navigators is now a part of a larger segment within The Hartford organization, and since its acquisition, has effectively integrated with The Hartford.
Navigators’ five- and 10-year average underwriting performance metrics remain in line with the composite averages. Net investment income is solid and has grown steadily over the past five years, supported by a high quality investment portfolio. Recent reserve strengthening and higher loss and loss adjustment expenses have adversely impacted results for 2019.
The favorable business profile reflects Navigators’ leading position as a global provider of insurance to the marine sector, the multichannel distribution platform that utilizes global, national and regional brokers, as well as wholesalers. Navigators’ platform has been fully integrated into The Hartford’s global specialty segment and is expected to complement more traditional commercial products offered by The Hartford.
Navigators’ ERM is now incorporated into The Hartford’s risk framework, which AM Best views as appropriate for the group’s size and complexity of its underwriting, investment and other risks.
The ratings of NIIC reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect, in the form of lift, the support provided to NIIC by its ultimate parent The Hartford, which includes a capital maintenance agreement from NIIC’s intermediate parent, The Navigators Group, Inc.
The revision of the Long-Term ICR outlook to negative reflects uncertainty as to the future business plans of NIIC, and the impact that this has on its business profile and its strategic importance to The Hartford. The FSR remains stable.
The Hartford’s debt-to-total capital ratio and interest coverage ratios are within AM Best’s guidelines for its current ratings. AM Best anticipates The Hartford will maintain solid liquidity to support any potential capital needs of its operating subsidiaries.
A complete listing of The Hartford Financial Services Group, Inc.’s FSRs, Long-Term ICRs and Short- and Long-Term IRs also is available.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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